Taxpublishers.in - InterestingDecision/IDDTF_307.htm - Tax Publishers Your Tax Solution Hub

Share via Whatsapp 19 Views


Tax Publishers Computerized ticket reservation system rendered from overseas - Whether PE exists - attribution of income *Facts:* In a chequered history on this topic it was held in past year cases of assessee or their similar lines of business of competitors Galileo USA,Travelport, Sabre etc. who had established exclusively agents in India installed computers and servers to enable airline computer reservation systems (CRS). The computers and the equipments were read to have created a Place PE in India and the exclusivity of an Indian agency to market its products, reservation systems also triggered an agency PE under Indo-US DTAA. Attribution of profits/income in India was made @ 15% of the profits earned and since the Indian exclusive agent was remunerated at 60% which was more than the attributable profits no further attribution of profits was possible in India. It was thus held in a series of cases the lead one being Galileo International reported in (2009) 336 ITR 264 (Del-HC) : 2009 TaxPub(DT) 1488 (Del-HC) for assessment years 1997-98 to 2005-06. The said HC decision was upheld also by the Apex court in Travelport and others in Civil Appeal 6511/2010 and order, vide order dated 19-04-2023 : 2023 TaxPub(DT) 2563 (SC) where the Delhi HC decision of Galileo was also upheld. In the individual cases of the assessee's the facts might vary marginally but is how the entire case has travelled until now. In the subsequent years to assessment years 2005-06 to AY 2011-12 the assessee has agreed to the stand of the revenue to buy peace is also to be noted. Revenue took the same stand for the subject assessee on existence of a place and agency PE and also on attribution of income from 2012-13 to assessment year 2016-17 in these series of cases. Assessee's plea was that post 2005-06 the business model of the assessee has changed in the manner that they no longer have any exclusive distributor in India who is incharge of setting up and owning the computer terminals etc. but the contracts with the airlines and entities like Amex etc. are entered directly globally by the assessee and their offshore counterparts. There is no Indian distributor any longer. There is no server or computer and these are cloud hosted and run from outside India. There is no dependent agent either. These facts were not considered by the AO/DRP who gave the same mechanical reading of existence of a place PE and an agency PE and attribution was made at 15%. Assessee also brought on record that they have been accepting the stand of the revenue to buy peace to avoid protracted litigation and since there is no res judicata principle in income tax the assessee sought to take a different stand from the subject assessment years under appeal by bringing forth the above facts. On higher appeal aggrieved by the order of the AO/DRP on the attribution and reading of PE to ITAT - Held in favour of the assessee that they did not have any place or agency PE in India and accordingly no attribution of income is possible any more for the subject assessment years. *Read:* Western Union Financial Services Inc. reported in (2007) 104 ITD 34 (Del-Trib) : 2007 TaxPub(DT) 0214 (Del-Trib) E-funds It Solutions Inc reported in (2017) 399 ITR 34 (SC) : 2017 TaxPub(DT) 4562 (SC) - revenue to prove existence of a PE. Nova Pignone International [ITA 999/Del/2022, dt. 13-06-2023] - Existence of a PE is a year on year check. *Ed. Note:* A landmark decision that brings many points on this much debated topic to a rest hopefully. Reference be made to the earlier flashes on this topic which are being sent one by one of earlier years for your perusal. *Case:* Sabre GLBL Inc. v. Asstt. CIT 2024 TaxPub(DT) 833 (Del-Trib)

Tax Publishers

Computerized ticket reservation system rendered from overseas - Whether PE exists - attribution of income

Facts:

In a chequered history on this topic it was held in past year cases of assessee or their similar lines of business of competitors Galileo USA,Travelport, Sabre etc. who had established exclusively agents in India installed computers and servers to enable airline computer reservation systems (CRS). The computers and the equipments were read to have created a Place PE in India and the exclusivity of an Indian agency to market its products, reservation systems also triggered an agency PE under Indo-US DTAA. Attribution of profits/income in India was made @ 15% of the profits earned and since the Indian exclusive agent was remunerated at 60% which was more than the attributable profits no further attribution of profits was possible in India. It was thus held in a series of cases the lead one being Galileo International reported in (2009) 336 ITR 264 (Del-HC) : 2009 TaxPub(DT) 1488 (Del-HC) for assessment years 1997-98 to 2005-06. The said HC decision was upheld also by the Apex court in Travelport and others in Civil Appeal 6511/2010 and order, vide order dated 19-04-2023 : 2023 TaxPub(DT) 2563 (SC) where the Delhi HC decision of Galileo was also upheld. In the individual cases of the assessee's the facts might vary marginally but is how the entire case has travelled until now. In the subsequent years to assessment years 2005-06 to AY 2011-12 the assessee has agreed to the stand of the revenue to buy peace is also to be noted.

Revenue took the same stand for the subject assessee on existence of a place and agency PE and also on attribution of income from 2012-13 to assessment year 2016-17 in these series of cases. Assessee's plea was that post 2005-06 the business model of the assessee has changed in the manner that they no longer have any exclusive distributor in India who is incharge of setting up and owning the computer terminals etc. but the contracts with the airlines and entities like Amex etc. are entered directly globally by the assessee and their offshore counterparts. There is no Indian distributor any longer. There is no server or computer and these are cloud hosted and run from outside India. There is no dependent agent either. These facts were not considered by the AO/DRP who gave the same mechanical reading of existence of a place PE and an agency PE and attribution was made at 15%. Assessee also brought on record that they have been accepting the stand of the revenue to buy peace to avoid protracted litigation and since there is no res judicata principle in income tax the assessee sought to take a different stand from the subject assessment years under appeal by bringing forth the above facts. On higher appeal aggrieved by the order of the AO/DRP on the attribution and reading of PE to ITAT -

Held in favour of the assessee that they did not have any place or agency PE in India and accordingly no attribution of income is possible any more for the subject assessment years.

Read:

Western Union Financial Services Inc. reported in (2007) 104 ITD 34 (Del-Trib) : 2007 TaxPub(DT) 0214 (Del-Trib)

E-funds It Solutions Inc reported in (2017) 399 ITR 34 (SC) : 2017 TaxPub(DT) 4562 (SC) - revenue to prove existence of a PE.

Nova Pignone International [ITA 999/Del/2022, dt. 13-06-2023] - Existence of a PE is a year on year check.

Ed. Note: A landmark decision that brings many points on this much debated topic to a rest hopefully.

Reference be made to the earlier flashes on this topic which are being sent one by one of earlier years for your perusal.

Case: Sabre GLBL Inc. v. Asstt. CIT 2024 TaxPub(DT) 833 (Del-Trib)